CFA Institute publishes draft ESG disclosure standards

May 28, 2021

CFA Institute has published draft voluntary standards for ESG disclosures for investment managers.

The draft standards are designed to be applied to any product on a case-by-case basis regardless of how products are “named, labelled, or categorised”.

The voluntary disclosure code includes “requirements” and recommendations covering product objectives, benchmarks, data sources and forms, exclusions, analytics, valuations, impacts, and stewardship.

Margaret Franklin, president and CEO of CFA Institute, described the new standards as “another step towards ensuring transparency and safeguarding trust in our industry”.

She added: “The pandemic has galvanised both interest and real action in ESG investing, and there is widespread support for standards that will bring greater clarity and efficiency to the identification, comparison and presentation of products with ESG-related features. These will be the primary benefits for all users of the standards.”

The institute’s move comes despite criticism from some quarters that its work duplicated standards already in use from other organisations. Paul Andrews, managing director of research, advocacy and standards at CFA Institute, said the standards aimed to “harmonise” existing product-level disclosure rules and standards, “as well as address gaps where no standards exist”.

The draft was compiled by a team including ESG investing experts from asset owners, asset managers, consultants and service providers. The document includes the results of a public consultation from last year.

CFA Institute is now seeking further input from the investment industry to “help shape the final version”, it said. The final document is scheduled to be published in November.

Research conducted last year by the institute found that 85% of its members took ESG factors into account when investing, up from 73% three years ago. The growth was driven by client demand, the institute said, with 69% of retail investors and 76% of institutional investors having interest in ESG investing. 

The body also suggested that organisations should dedicate more efforts to integrating ESG and sustainability into their investment models, as well as strengthening collaborations within and across organisations to help drive engagement.